People familiar with the situation said on Tuesday that Chinese regulators are preparing to punish ride-hailing company Didi Global for more than $1 billion, which could put an end to an investigation into the company’s cybersecurity procedures.
According to the sources, the fine would equal more than 8 billion yuan ($1.28 billion), or approximately 4.7 percent of Didi’s $27.3 billion in annual revenue. They opted not to give their names because the information had not yet been released.
The potential scale of the penalties was first reported by The Wall Street Journal earlier on Tuesday.
A reporter’s request for comment was not immediately answered by the ride-hailing company.
Since China’s antitrust authority levied fines of $2.75 billion and $527 million, respectively, against delivery juggernaut Meituan and e-commerce powerhouse Alibaba Group, Didi’s fine would be the highest regulatory sanction ever on the Chinese internet business.
Meituan’s fine was equal to 3% of its 2020 domestic sales, but Alibaba’s sanction was equal to nearly 4% of its 2019 domestic sales.
Beijing may decide to relax the prohibition preventing Didi from adding new users to its platform and permit the restoration of its apps on domestic app stores in response to Didi’s punishment.
Didi, which Will Wei Cheng, a former employee of Alibaba, co-founded in 2012 and is supported by SoftBank Group and Uber Technologies, has previously set aside 10 billion yuan for a potential fine, according to reporters.
After upsetting Chinese officials by proceeding with its $4.4 billion New York IPO in June 2021 despite being urged to postpone it, the company has battled to get its business back to normal.
The Cyberspace Administration of China, China’s powerful internet authority, initiated a cybersecurity investigation into Didi’s data practices days after it went public and commanded app shops to remove 25 of its mobile apps.
The limitations have weakened Didi’s hegemony and made it possible for rival ride-hailing services run by the automakers Geely and SAIC Motor to increase their market share.
The company declared in December that it would delist from the New York Stock Exchange, and in May its shareholders approved the move.
During its initial public offering (IPO), Didi’s shares skyrocketed, giving the business an $80 billion valuation. Since 2014, it was the largest U.S. listing by a Chinese company.
In July 2021, the CAC also started conducting cybersecurity audits of Full Truck Alliance and the online employment agency Kanzhun Ltd. in addition to Didi.
On June 29, Kanzhun and Full Truck Alliance announced that the regulator had approved the restart of new user registrations on their apps.
